So far, no state college or university has been turned into a for-profit enterprise. But that may be about to change.

A private investor has offered to buy the online operations and students of Rio Salado College -- a community college in Arizona where about half of the 60,000 students study only online -- for at least $400 million, and officials at the Maricopa County Community College District, of which Rio Salado is a part, are considering the offer.

Under the terms of the letter of intent, which was transmitted to and discussed with Maricopa officials last week and obtained by Inside Higher Ed, an investment group would pay $5,000 per enrolled student (or $400 million, whichever is more) for the "assets used to operate" the college, presumably including its online learning system, curriculum and faculty. The proposal from Significant Partners and its founder and chairman, Michael Clifford -- who has invested previously in the privatization of Grand Canyon University and now manages another education company that owns LA College -- also offers to pay market price for the real estate and other physical assets used to carry out Rio Salado's online operations.

“Rio should continue to be the shining star of Arizona’s education system. But it needs an injection of fresh capital not from the backs of the Arizona taxpayers, but from private industry," Clifford said in an interview. He said that under his proposal, the 30,000 students who now take a few courses online with Rio but most of their classes at on-ground Maricopa campuses would revert to the community college district, and SignificantPartners would focus on aggressively promoting the newly for-profit Rio Salado outside Arizona and "competing on a global basis." (The term sheet for the deal not address the question of tuition, but Clifford said in an interview that he would expect to keep tuition at roughly current rates for state residents but increase them 7 to 10 percent a year for online students from out of state.)

"My hope would be that the hundreds of millions we would put forth would be used by the [Maricopa] board to begin a much needed endowment to help scholarship Arizonans that need additional help or access to Rio's degrees," Clifford said.

Rio Salado's president, Linda Thor, briefed faculty and staff members at the community college on the proposal Tuesday morning, and Rufus Glasper, chancellor of the Maricopa district, was scheduled to discuss the plan with members of the district's board at a meeting last night.

In a message he sent to members of the board Tuesday, Glasper described the offer as "flattering" and "strong reinforcement of the good work we do." Glasper was noncommittal about how he viewed the offer, saying that "the legality and ramifications of such a transaction have not been determined," and that he was "informing you of this interest so that you understand the situation should it be brought forward for public discussion by the group wishing to purchase Rio Salado."

"While we are obligated to perform due diligence and review any such offer, we remain committed to the important work we do; teaching and learning," he added.

Thor, Rio's president since 1990, said in an interview Tuesday that she too was "very, very flattered by this offer, particular the size," and that she and her colleagues viewed it as "enormous validation" of the work they do. But the fact that no public college has ever been taken for-profit -- several longtime observers of higher education said they were unaware of such a precedent -- has left the district's lawyers with "lots of questions" about the proposal, Thor said, including a fundamental one: "Is this something we can even consider?"

Michael Goldstein, a Washington lawyer who is widely seen as one of the deans of higher education law, laid out -- without knowing details about the Rio Salado deal specifically -- some of the legal and financial questions that would probably be raised by such a transaction. He said that in one way, the "sale" of a public college to a for-profit entity would be easier than the transition of a private nonprofit college into a for-profit one, because the Internal Revenue Service would not get involved to question whether the nonprofit "owner" of the institution is getting its full value from the buyer.

"States are sovereigns," he said. "If a state decides it wants to sell a campus or a school for $1, it has the power to do so."

But many hurdles would remain to such a deal, said Goldstein, of the Washington law firm Dow Lohnes. In addition to a community college's board, the state attorney general would presumably have to sign off as well, and a change of ownership such as this would also have to pass muster with the institution's accreditor, in this case the Higher Learning Commission of the North Central Association of Colleges and Schools.

Steven D. Crow, president of the Higher Learning Commission, said last week -- also discussing the hypothetical possibility of the sale of a community college to a for-profit investor -- said that "the big question was whether the college will remain accredited" after the sale.... We have processes to review [such potential changes in ownership], and the relevant parties will have to come to us at the appropriate time."

Perhaps more than anything, though, a deal like the one Clifford is proposing may face as many perceptual hurdles as legal and financial ones. Many of the purchases of private nonprofit colleges by for-profit entities have engendered fears -- some of which have come to pass, at least initially -- that the institutions' public missions will be replaced by a bottom-line orientation that may endanger the quality of education. And at some institutions, faculty leaders would be likely to scream bloody murder about the idea of a for-profit takeover, given the skepticism with which many traditional professors view the sector. (Some might also be troubled by a clause in the term sheet that says that "[b]uyer will select the faculty and staff it wishes to hire by closing.")

But Rio Salado has long had an unusual mission and a maverick spirit -- college leaders boast of being a "college without walls" and of having collaborated with Microsoft and Dell to build their distinctive online learning system -- and its faculty is structured unusually as well, with about 30 full-time professors working with an army of about 1,100 adjuncts.

It may not be surprising, then, that faculty leaders seem open to the idea, at least at first blush. "It's fair to say that we were -- how to say it?" "Stunned?" a reporter asked. "Stunned, yes, and very pleased, too," Pat Case, faculty chair in the social sciences and Rio's Faculty Senate president, said of faculty reaction after Tuesday's briefing by Thor. She said there were lots of questions about what such an arrangement would mean personally for faculty members, regarding retirement and other benefits, but that "perhaps because of the way we’ve developed our culture ... we don’t have a closed mind to it."

"Throughout the years," Case added, "we have had a really superb relationship with the administration, and we have tremendous confidence in Linda. We feel very strongly that she and the chancellor always have and will continue to include us in the discussions, and we'll have confidence in their work in whatever direction it goes."

Thor said she was not certain where the purchase offer would eventually lead her institution, but she said it was certain to prompt discussions about "what is our future?" and "where else can we take this?" -- perhaps to more public-private collaboration and cooperation, if not an outright purchase.

Clifford, who does not lack for confidence, preferred to put his offer in a larger context. “We are helping to lead the largest deregulation of an industry in American history: Education is a $750 billion industry that is now catching the focus of Wall Street. This is only the beginning of offers to nonprofit institutions to join forces with the enormous amount of investment capital available for online education."